Establish a basic payroll structure to help you hire employees. Then handle employees appropriately with a general understanding of state and federal labor laws.
Hire and pay employees
Before you find the right person for the job, you will need to create a plan to pay employees. Follow these steps to set up payroll:
- Obtain an Employer Identification Number (EIN)
- Find out if you need one state or local tax ID.
- Decide if you want an independent contractor or an employee
- Make sure new hires return the completed W-4 form
- Schedule pay periods to coordinate withholding tax for the IRS
- Create a compensation plan for vacations, vacations, and vacations
- Select an internal or external service to handle payroll.
- Decide who will manage your payroll system
- Know which records need to be kept on file and for how long
- Report payroll taxes as needed quarterly and annually
The IRS maintains the Employer Tax Guide, which provides guidance on all federal tax reporting requirements that may apply to your small business obligations. Check with your state’s tax agency for employer statement stipulations.
Employees and independent contractors
Distinguishing between employees and independent contractors can have an impact on your bottom line, as this affects how you withhold taxes and avoid expensive legal consequences. Learn the differences before hiring your first employee.
An independent contractor operates under a separate business name from his company and bills for work performed. Independent contractors can sometimes qualify as employees in a legal sense. The Equal Employment Opportunity Commission created a guide to make up your mind.
If your contractor is found to meet the legal definition of an employee, you may have to pay taxes and penalties, provide benefits, and reimburse wages stipulated in the Fair Labor Standards Act.
Plan to offer employee benefits
Health care and other benefits play an important role in hiring and retaining employees. Some employee benefits are required by law, but others are optional.
Required benefits for employees
- Social Security Tax: Employers must pay the taxes of the Social Security at the same rate as your employees.
- Workers Compensation: Required through a commercial carrier, self-assurance basis, or State Workers’ Compensation Program.
- Disability Insurance: Disability payment required in California, Hawaii, New Jersey, New York, Rhode Island and Puerto Rico.
- Licensing benefits: Most licensing benefits are optional outside of those stipulated in the Family and Medical Leave Act (FMLA)
- Unemployment insurance: Varies by state, and you may need to register with the state workforce agency.
Optional employee benefits
Your small businesses can offer a full range of optional benefits to help attract and retain employees. Even if a benefit you offer is optional, you may have to comply with certain laws if you choose to offer it.
Businesses that offer group health plans must comply with federal laws, for which the Department of Labor offers a guide.
Employees can expand coverage through the Affordable Care Act and some may qualify for benefits through the Consolidated Omnibus Budget Reconciliation Law (COBRA). Businesses must extend the COBRA benefit option to laid off or laid off employees.
Retirement plans are a very popular benefit for employees. Consider offering an employer-sponsored plan like a 401k plan or a pension plan. The federal government offers a wide range of resources to help small business owners choose their retirement and pension plan.
Employee incentive programs
Employee incentive programs can boost morale and create more opportunities for open positions: Common incentives such as stock options, flexible hours, wellness programs, corporate memberships, and company events.
Consider benefits management software if your budget allows it. It can make your accounting easier and more efficient. Detailing these benefits in the employee handbook helps your staff make decisions, and they can use it as a reference for workplace requirements.
Follow federal and state labor laws
Protect the rights of workers and your company by adhering to labor laws, which means that you must ensure that business practices conform to industry regulations.
This includes learning applicable laws for the hiring of veterans, foreign workers, domestic employees, child labor Y People with disabilities, among other groups. You must also comply with the above when laying off an employee, laying off workers, or downsizing the business.
Example of hiring and managing staff in a successful business
Formation of your team
John and Kelly hired employees to help manage the day-to-day operation of their auto repair shop.
John and Kelly need to establish a payroll structure to hire employees to work in their auto repair shop.
They write descriptions of each position they want to fill – clearly defining the responsibilities of each position and the necessary qualifications – and post job openings on the most popular online job boards.
John and Kelly set the salaries for each position, at least meeting their state’s minimum wage requirement.
Each new hire completes a W-4 form, which John and Kelly send to the IR. S. (The IRS requires businesses to keep employment tax records for at least four years. They also complete Form I-9, which requires John and Kelly to examine documents to confirm the employee’s citizenship or eligibility. to work in the U.S. (They do not have to submit this form to the federal government, but they do have to file it.
John and Kelly contact their state tax office to inquire about their state tax obligations. They also report their new hires to their state directory within 20 days of the employee’s hire date, as required by their state.
John and Kelly pay for an online payroll service, which automatically calculates how much their employees are due each pay period, accounting for tax deductions.
John and Kelly have hired employees and established tax records, and have a system for paying their employees.